How can you tell when a CEO is lying? It turns out that it’s slightly more complicated than monitoring the movement of their lips.
A recent Stanford Graduate School of Business study analyzed 30,000 conference calls held to discuss public companies’ earnings. The results could turn the art of detecting executive deception into a science. One telltale sign: The frequent use of swear words.
The discovery is timely. Remember how Enron CEO Jeff Skilling famously called an investor who questioned his claims an “asshole“? We know how that turned out. Now Kara Swisher of AllThingsD is all but openly calling Yahoo CEO Carol Bartz a liar in her coverage of the company’s recent executive departures. And Bartz, whose leadership of the fading Internet giant is looking ever rockier, famously swears like a sailor.
Then there’s Tesla Motors CEO Elon Musk, who publicly called one New York Times writer a “douchebag,” and uses saltier language in private to deride journalists who don’t print verbatim the electric-car investor’s carefully edited version of reality. (No wonder he hired prim and proper VentureBeat wordsmith Camille Ricketts to help clean up his act.)
There are other “tells” indicated in the paper, such as using enthusiastic words like “great” or “fantastic” rather than merely “good” to describe financial results. Once again, Enron’s Skilling was an exemplar of this. So was Bartz in the company’s most recent conference call:
… display growth is very strong … we are making great progress on growing profits and margins … General Motors was the first to use the new format and the results were simply fantastic … So these are great numbers and a big reason why the ads did so well is they just looked great.
Great! Fantastic! So great and fantastic that the stock hasn’t budged in Bartz’s tenure.
And Tesla’s Musk has never failed to express his boundless optimism for Tesla’s prospects in emphatically certain terms. An absence of words expressing uncertainty is another indicator of deception, according to the Stanford study.
There’s no reason to believe Yahoo and Tesla are Enrons in the making just because their leaders have made a few intemperate remarks. But based on the findings of this study, perhaps Silicon Valley CEOs should watch their language. Certainly their shareholders should.
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